HSH bondholders seek U.S. help in lawsuit over treatment by HSH in privatisation

Some bondholders of German lender HSH Nordbank have turned to the United States for help in a planned litigation over alleged unfair treatment of them during the bank’s privatisation earlier this year.

The holders of 900 million euros (795.31 million pounds)in HSH tier 1 instruments said on Wednesday that they had requested the right to serve subpoenas on Cerberus, J.C. Flowers and Goldentree, which bought the bank in February.

As part of the buyout, the same private equity investors also took over an HSH loan portfolio at a discount, prompting writedowns at HSH and hitting the tier 1 instruments.

The bondholders plan to sue HSH in Germany, alleging that no effort was made to market the loan portfolio – mainly bad ship loans – in a competitive process and that the sale of the loans may have been structured to benefit the HSH buyers at the expense of the tier 1 holders.

“The German litigation will focus on whether the tier 1 holders have been subject to improper and unlawful treatment by HSH,” the bondholders said in a statement.